Saturday, May 31, 2014

How a Carbon Market Works

Governments around the world are experimenting with issuing permits that allow industries to emit carbon dioxide and other greenhouse gases, then restricting those permits to rein in carbon emissions.

CAP

CAP LOWERED

Purchased or

traded permits

Carbon

dioxide

emissions

Carbon

permits

Remaining

carbon

permits

Freely issued permits

CAPPED INDUSTRIES

INDUSTRY A

INDUSTRY B

CAPPED INDUSTRIES

CAP AND PERMIT

The government imposes a cap on the total amount of greenhouse emissions allowed from major industries, then issues permits to match the amount of the cap. Each permit allows the emission of one ton of carbon dioxide, or equivalent.

ISSUE, BUY AND TRADE

Initially, most of the permits are given to industries at no cost. The remaining permits can be bought at a government auction or traded in a carbon market set up for that purpose.

LOWERING THE CAP

The government gradually lowers the carbon cap by a few percent a year, which reduces the number of available permits and cuts the total amount of pollution allowed by the industries under the carbon cap.

No reduction

in emissions

Offset credits

Steep reduction

Investment

CARBON-REDUCING

PROJECT

INDUSTRY A

INDUSTRY B

INDUSTRY A

REDUCING TOTAL EMISSIONS

Industries can reduce their emissions by spending money to upgrade their facilities and equipment, or they can use the carbon market to purchase the carbon permits needed to cover their emissions — whichever is cheaper.

CARBON OFFSETS

Industries can also invest in projects elsewhere that lower carbon emissions, like forestry or burning methane from dairy cows. These projects create “offset credits” that can be used or sold, usually at a lower price than government-auctioned permits.

Friday, May 30, 2014

In January I blogged about these two sessions at the AEA meeting, and now they are published, except for the paper by Milgrom and Segal, which ran into some kind of embargo before the still to be conducted FCC auction...
[The links below go to a page that requires AEA membership to fully access, but you can see the article abstracts by clicking on "Show Article Details"]

Frontiers
of Market Design

Implementation
Details for Frequent Batch Auctions: Slowing Down Markets to the Blink of an
Eye (#72)
Eric Budish, Peter Cramton and John Shim

Wednesday, May 28, 2014

There are lots of issues to be settled about transactions related to reproduction, such as surrogacy, and egg and sperm donation. Some of these are illustrated by a case going through both the courts and the media in California. Here's the NY Times story: Does ‘Sperm Donor’ Mean ‘Dad’?

Here's a relevant paragraph about the existing laws:

"California, like many states, according to Professor Cahn, has conflicting statutes. One provides that any man can establish parentage if he “receives the child into his home and openly holds the child out as his natural child.” But another statute holds that a man who provides his sperm to a doctor for the purpose of inseminating an unmarried friend is “treated as if he were not the natural father” — unless there is a specific written agreement ahead of conception."

They are all worth listening to. (You have to scroll down to get to the Research Briefings.)

My lecture starts at 47:30 (and you can get there directly by clicking on the link "Market Design: The Economist as Engineer. Alvin E. Roth" It's 20 minutes (it was supposed to be 15, with 5 minutes for questions, but I wasn't the worst offender...).

Not shown in the rush is the final slide from my Nobel lecture, about market design being a team sport:

The duo is marketing their idea — renamed “Ticker” — through their Evanston-based company, Cheap Talk LLC, to other universities, professional teams and even concert venues that may be interested in hiring them as price consultants.

But unless ticket vendors know more about which customers are buying at what prices, it will be a hard sell, says Nels Popp, an assistant professor in the sports administration program at the University of North Carolina who researches team and school ticket sales. Bargain-hunters, for instance, may be less likely to become repeat customers. “They're there, but they're not who you're going to build your (ticket sales) base around,” he says. “That might be a challenge.”

Mr. Ely concedes Purple Pricing has been a tough sell. “But if we can have a few successes in different contexts under our belt, that would be huge.”

"Three academics were named co-winners of the $100,000 prize inAQR Capital Management's Insight Awards, for their paper on market dynamics and structure in an era of high-frequency trading, outdoing four other finalist papers, including one co-authored by a Nobel laureate.

Eric Budish, Peter Cramton and John J. Shim were recognized for what AQR called their “path-breaking” paper, “The High-Frequency Trading Arms Race: Frequent Batch Auctions as a Market Design Response.” Their research uses “millisecond-level direct-feed data from exchanges.” The authors propose an alternative to the “arms races” employed to exploit trading opportunities.

The three — Mr. Budish, associate professor of economics,University of Chicago Booth School of Business; Mr. Cramton, professor of economics, University of Maryland, College Park; and Mr. Shim, Chicago Booth School Ph.D. candidate in finance — will share the prize equally.

In their paper, the authors contrast important costs and benefits of continuous trading when traders transact virtually instantly in ever smaller increments of time and trading in discrete intervals of time, say, every 100 milliseconds, and conclude discrete interval trading better serves market participants.

In total, 248 papers, all unpublished as required by the competition, from 26 countries were submitted in AQR's third annual competition.

AQR plans to post the papers on May 28.

The winning paper was among five finalist papers. Authors from each finalist paper presented and discussed their research April 24 before a gathering, including the 19-member AQR award selection committee and some AQR clients.

The authors of the other finalist papers were recognized with honorable mention awards, which carry no cash prize. They are:

Robert F. Engle III, winner of the 2003 Nobel prize in economics and the Michael Armellino professor of finance, Stern School of Business, New York University, and Emil N. Siriwardane, Stern School Ph.D. candidate in finance, co-authors of “Structural GARCH: The Volatility-Leverage Connection”;

Dong Lou, assistant professor in finance, and Christopher Polk, professor of finance, both of the London School of Economics, co-authors of “Comomentum: Inferring Arbitrage Activity From Return Correlations”;

Samuel M. Hartzmark, Ph.D. candidate in finance and business economics, Marshall School of Business, University of Southern California, author of “The Worst, the Best, Ignoring All the Rest: The Rank Effect and Trading Behavior.”

The award, sponsored by AQR, seeks to encourage innovation in academic research that can be applied in investment management, said David Kabiller, AQR founding principal and a member of the committee, in an interview.

AQR set a large cash prize to draw attention to the competition and encourage top submissions because “we believe the market responds to incentives,” Mr. Kabiller said.

Submissions for papers for the fourth annual AQR Insight Award competition are due Jan. 15."

Thursday, May 22, 2014

"MOVING to an opt-out system of organ donation in Scotland would “not necessarily” lead to more transplant operations taking place, the public health minister has said.

Michael Matheson insisted the Scottish Government was still “unconvinced” about making such a change.

He spoke out as Holyrood debated a petition backed by more than 20,000 people calling on ministers to introduce an opt-out system for organ donation.

Wales is introducing an new system of deemed consent at the end of next year, where organs can be taken for transplant unless people have made it clear they do not wish this to happen after their death.

Mr Matheson told MSPs the Scottish Government would monitor the situation in Wales to see what impact the change had.

But he stated: “It would be fair to say we remain unconvinced that we should make any move to introduce an opt-out system right now.

“I want to make sure that we keep this issue under review and learn from what happens in Wales, but we are making great progress here in Scotland with the programme of activity we have under way.”

The minister added: “People believe opt-out will mean more organs will become available but our own experts tell us this is not necessarily the case.

“Opt-out means increasing the proportion of the population on the organ donor register but you don’t need to be on the organ donor register to be a donor. Over the last five years, 62% of all donors in Scotland are not on the donor register.

“The real issue that limits the number of donors is the number of people who die in circumstances where donation is possible.

“Unfortunately, to become an organ donor you really have to die in intensive care, and only about 1% of deaths in Scotland occur in these circumstances. Sadly that’s something opt-out in itself can not change.”

Mr Matheson said the US had a higher organ donation rate than Scotland but did not have an opt-out system while Sweden has an opt-out system, but has a lower donation rate than Scotland.

“There is no single thing that will bring about the revolution in donation rates,” Mr Matheson said.

He stressed the Scottish Government was “committed to increasing organ donations in Scotland”, adding: “I don’t believe any other country in the UK can say it has done more on this agenda in the last five years than what has happened here in Scotland.”

He told how Scotland had almost doubled the number of organ donors in the last six years, adding there had been a 62% rise in transplants being carried out - the highest increase in the UK.

Meanwhile, there has been a 25% reduction in the transplant waiting list since 2006-07, Mr Matheson said.

He told MSPs: “We’re making the best progress in the UK. We’re seeing more donors and we’re delivering more transplants and we’re saving more lives as a result.

“We will keep on review how the opt-out process progresses in Wales, but while we are making the sort of progress we have delivering here in Scotland over recent years, I believe it is prudent and appropriate that we should wait to see what happens in Wales before we start to introduce significant legislative change here in Scotland.”

"Israelis who owe money to loan sharks are being forced to sell organs abroad in order to pay back their debts, the head of Israel's Enforcement and Collection Authority has warned the deputy attorney general, in a letter obtained by Ynet.

"The letter by David Madioni to Avi Licht paints a dark picture of black market moneylending in Israel. Known debtors are requesting permission to leave the country, he claims, with the express intention of selling organs.

"Madioni notes in the letter that a number of debtors have recently visited his office in Tel Aviv, seeking to abolish restrictions on them leaving the country. These people, Madioni writes, told him their trips are expressly in order to sell organs to clear their debts.

""I clarified that each is in debt to loan sharks in addition to existing debts (dealt with by the state)," reads the letter to Licht. "Black market elements 'recommended' that they sell their kidneys abroad so as to repay their debts, while threatening their lives if they do not comply."
...
"These cases point to a frightening phenomenon, which are offenses under the law on organ transplants," Madioni wrote. "Beyond this, there appear to be far more serious offenses of extortion through threats, exploitation and physical harm for payment of debts."

Monday, May 19, 2014

I visited my old high school this past weekend, Martin Van Buren High School in Queens, in New York City. It was fun on a number of different levels. But it reminded me that credentials are complicated. The powers that be inquired into the possibility of giving me a high school diploma, but found, not surprisingly, that I'm still not qualified. But I got to add an honorary high school diploma to my growing collection of unusual honorary degrees. And I found out that I had been included in the 1969 Yearbook with the rest of my class, although I didn't graduate with them.

Sunday, May 18, 2014

"The Federal Communications Commission today adopted rules to implement the Broadcast Television Incentive Auction. The two-sided auction will use market forces to recover spectrum from television broadcasters who voluntarily choose to give up some or all of their spectrum usage rights in exchange for incentive payments, in order to auction new spectrum licenses to wireless providers."

Saturday, May 17, 2014

My old high school--which was a giant city school when I attended, with well over 1,000 students graduating each year--hasn't been thriving, and a group of alumni are hosting a Celebration to help revive it.

It turns out that I am the second, not the first Nobel laureate to have attended.
Here are the details.

Saturday, May 17, 2014 • 1:30pm – 12:00 Midnight

A Day of Celebrating Martin Van Buren High School’s
Past, Present and Future!

at Martin Van Buren High School, Queens Village, NY

BASKETBALL CLINIC: 1:30pm – 3:30pm

MVB Alum, and Head Coach of Fordham University’s Basketball Team, Tom Pecora, and his team will conduct a clinic for 6th-8th grade youth from community schools.

MVB OPEN HOUSE: 3:00pm – 5:00pm

Learn about MVB’s new and exciting programs,
Visit with former teachers, Tour the school, Meet today’s students

Everyone is welcome. There is no charge for this event.

MVB SHOWCASE: 5:00pm – 6:00pm

The Best Of MVB,
Showcasing our band, chorus, and dance troupe.
Everyone is welcome. There is no charge for this event.

HALL OF FAME: 6:00pm – 8:00pm

Honoring Distinguished MVB Alumni

Alvin Roth, Nobel Prize Economics

Frank Wilczek, Nobel Prize Physics

MVB’s 1958 Championship Baseball Team

Ray Kurzweil, Inventor and Futurist

Donny Deutsch, Media Personality

Attendance is free for this event, but space is limited. Please sign up in advance by email at mvbhsalumns@gmail.com

All-CLASS REUNION: 8:00pm – 12:00 midnight

Join the 55 graduating classes for the first ever all-class reunion at MVB!

Here's some news coverage of the run-up to the event, which includes this:

"After the city lifted zoning restrictions more than 10 years ago, students left Van Buren en masse for schools like Francis Lewis, Bayside and Cardozo high schools. Van Buren received a “D” on its most recent city progress report and received a below-average rating on last year’s school survey.

But under the leadership of new Principal Sam Sochet, the school is poised for a turnaround, Wilson said, and part of the celebration day’s schedule includes an open house promoting a handful of new programs."

Thursday, May 15, 2014

Writing in The Atlantic, transplant surgeon Joshua Mezrich proposes compensating living kidney donors with health insurance, which he points out would not be expensive since those who qualify as donors are unusually healthy: Why we need more kidney donors, and how to get them

Wednesday, May 14, 2014

In considering where to look for more kidneys, we begin with basic demographics. The criteria used to identify suitable deceased donors have the effect of ruling out donations from all but a fraction of the 2.5 million people who die each year in the United States. Our research provides some detail on this “winnowing” process for the year 2010:

Almost 2/3 of all deaths happen to people over age 70, almost all of whom are deemed medically unacceptable donors.

Most remaining deaths happen outside of hospitals in uncontrolled settings like auto accidents, or occur inside the hospital from causes like cancer, diabetes, and renal disease that ordinarily rule out kidney donations.

The bottom line is that, in 2010, only about 9,000 deaths happened to “eligible” donors — in the sense that the deceased person had healthy organs and was declared dead due to cessation of electrical activity in the brain after the hospital had arranged to preserve blood circulation in the patient. In 70% of those cases the kidneys were in fact donated. An additional 928 donations happened after cardiac deaths (only rarely possible because successful preservation of kidneys under that circumstance is difficult).

Why monetary compensation should be considered

Basic arithmetic shows that even if everyone in the United States had signed an advance consent form allowing donation of organs, and every family honored that agreement at the time of death, only an additional 2,751 donors — yielding roughly 5,500 kidneys — would have been available in 2010. In short, the kidney shortage cannot be eliminated simply by measures aimed at increasing rates of donation from the deceased. Additional kidneys from people who die would be welcome, but will not be nearly enough to satisfy current need, let alone reduce the backlog of sick patients awaiting a life-saving kidney donation. Barring a major breakthrough in recovering organs from deceased patients currently deemed unsuitable, the only plausible solution is to increase donations from the living.

There are other advantages to using more living donors. More transplantable kidneys from live donors would improve health outcomes for those with end stage renal disease and reduce the annual cost per patient. Donating a kidney is no walk in the park, but the medical risks are very low. People can do just fine with a single kidney.

Currently, most people who donate one of their kidneys do so to help someone they know, usually a family member. Education and public outreach might increase the number of altruistic donors willing to make an organ gift to a stranger. But in 2012, only 182 people made such “nondirected” donations — and the trend is downward, not up.

The high and increasingly unmet need for transplantable kidneys prompts many observers — including us — to believe that the time is ripe to reconsider financial incentives. An unregulated market in kidneys would be open to abuses and corruption. A better alternative would be a public agency with sole authority to provide financial incentives for organ donation, after would-be donors are screened not just for good physical health but to ensure that they are making an informed decision after careful reflection. Even with safeguards, some say that putting a price on body parts is bound to be dehumanizing. But markets already exist for blood plasma, eggs, sperm and hair. At the end of the day, objections to compensation for kidney donors must be weighed against the growing loss of health and life caused by our current inadequate system.

Related research: An in-depth paper by Cook and Krawiec, “A Primer on Kidney Transplantation: Anatomy of the Shortage,” is forthcoming in Law and Contemporary Problems, Vol. 77, No. 3. A working version of the paper is available on the Social Science Research Network.

Exchanging kidneys

*************
For those of you who prefer reading to listening, or who want to read along, here's the transcript (I always find it a little sobering to see the way I talk transcribed...):

Podcast Interview: Alvin Roth
PNAS: I’m your host, Paul Gabrielsen, and welcome to Science Sessions. Imagine that someone you love is one of the 99,000 people in the U.S. who need a potentially life-saving kidney transplant. You might gladly give them one of your kidneys to save their life, but if your kidney is incompatible with your loved one, the transplant cannot proceed. Will your loved one then have to wait for a deceased donor kidney to become available, and risk becoming one of more than
3,000 people every year who die while waiting for a transplant? Or is there another option? Alvin Roth, an economist at Stanford University, realized that many such pairs of incompatible patients and donors may exist, and that they may be able to help each other. I spoke with Roth, a member of the National Academy of Sciences, by phone to discuss how principles of economics can save the lives of people who need kidney transplants.

PNAS: So, what is the outlook like for someone who needs a kidney transplant?

Roth: Good question. So, the outlook is not so good. People live around 5 years on dialysis, I mean, there’s a lot of variance. Dialysis is no fun, and it’s not a great treatment. Over time it gets worse. So people on dialysis need transplants, and there aren’t enough organs. If you have a live donor that’s compatible with you, they might give you a kidney right away and you would be spared dialysis. So, if you didn’t have a living donor, you would just wait on the regional list for
deceased donor organs, which can be many years in length. And that’s where kidney exchange comes in. You could be in that situation, you love someone enough to give them a kidney, but they can’t take your kidney, and I’m in the same situation. But now, you could give a kidney to my patient and I can give a kidney to your patient, we’d have exchanged kidneys and arranged it so that each kidney patient could get a kidney that they were compatible with.

PNAS: And to that end, you helped found one of the first kidney exchange programs, the New England Program for Kidney Exchange, in 2004. So let's say I have a kidney that I'd like to donate and I sign up into one of these exchanges. Can you walk me through the process?

Roth: Okay, so that depends. One critical difference – when you say you have a kidney you’d like to donate, is whether or not you have an intended recipient.

PNAS: Let’s say I do.

Roth: Okay, so someone you love needs a kidney, you’re happy to give her a kidney, and you sign up together. So you guys now are an incompatible patient-donor pair, and you are entered into a database. And what the algorithm would look for, it would look for a combination of cycles and chains. So a simple cycle would just involve two pairs. But sometimes you can’t find simple pairs like that, and you might find yourself in a three-way exchange. So, you can give a kidney to someone in pair 2, the donor in pair 2 can give a kidney to someone in pair 3, and the donor in pair 3 can give a kidney to your intended recipient. That’s a three-way exchange. Now, we do those exchanges simultaneously, because you can’t write a contract on a kidney. So to do them simultaneously means that a three-way exchange requires six operating rooms and six surgical teams because there are three nephrectomies, operations to take the kidney out, and three transplants. Tha’s about as big as it’s practical to do an exchange. But there’s another way, and that’s because there are some donors who don’t have intended recipients, that’s why I asked you when you said you wanted to sign up. And they can start chains, because the exchange doesn’t have to come back to them, so they can give a kidney to someone, to some pair, and the donor in that pair can give a kidney to another pair, the donor in that pair can give a kidney to another pair. When we have one of these non-directed donor chains, we can do the exchanges non-simultaneously, and that allows the chains to become very long. So, the first non-directed donor chain had 20 people in it, because there were 10 nephrectomies and 10 transplants. Not
every chain is long. The important thing is the chains can be non-simultaneous.

PNAS: So, you’ve actually attended one of these nephrectomies in Cincinnati. Can you tell me what that experience was like and why you decided to go?

Roth: Well, so, I had gone there to give a seminar on kidney exchange, and as it happened, the day of my seminar, they were doing one of our exchanges. A surgeon named Steve Woodle said to me, why don’t you just come and watch, and I thought, what a great idea! And I was a little – I had some trepidation, I worried that I would feel ill or something, but it turns out it’s just so interesting to watch and to listen to them talk about what they’re doing that I didn’t have to worry about that. And the nephrectomy I saw is what’s called a hand-assisted laparoscopic
nephrectomy, and what that means is the surgeon is working through pretty small incisions, he’s working with a camera and a video screen, so you can watch, in detail, what he’s doing with his equipment, and he’s assisted by a surgeon who inserts his hand through a slightly larger incision, and the two of them work as a team, the surgeon doing the cutting asks the assistant to put tension on different tissues, and you see all this on a video screen. And finally, it’s like a magic trick, the kidney comes out in the surgeon’s hand.

PNAS: So, what is the future of kidney exchange?

Roth: For kidney exchange, we’re still doing lots of things on how to make the exchanges work better, and some of those have to do with how surgeries are organized, some of them have to do with how payments are organized. Eventually, I hope that in a hundred years, my grandchildren and yours will think of transplantation as an outdated barbarity, they’ll say to you, “So tell me again grandpa, you used to cut an organ out of one person and sew it into a sick person and that was modern medicine?” I hope that advances in medicine will eventually give a better solution. That doesn’t mean that we can ’t keep moving ahead now, because for the time being there are lots of people waiting on the waiting list, and many of them die while waiting.

PNAS: Thanks for listening. You can find more podcasts at pnas.org.
***************

Welcome to Science Sessions, the PNAS podcast program. Listen to brief conversations with cutting-edge researchers, Academy members, and policy makers as they discuss topics relevant to today's scientific community. Learn the behind-the-scenes story of work published in PNAS, plus a broad range of scientific news about discoveries that affect the world around us.

Monday, May 12, 2014

Shortly after the Nobel prizes are awarded each year, it becomes the task of the staff of the Nobel Foundation to get the prizewinners to write various things, including an essay of intellectual autobiography. Mine was completed fairly promptly, and may have been available for some time now, but I just noticed that it is here (with some pictures:).

ABSTRACT

The incidence and prevalence of chronic kidney disease and end-stage renal disease (ESRD) have continued to increase exponentially all over the world in both developed and developing countries. While the majority of patients in developed countries benefit from various modalities of renal replacement therapies, those from developing economies suffer untimely deaths from uremia and cardiovascular disease. Kidney transplantation (KT) leads to improvement in both the quantity and quality of life. Unfortunately, it is not exploited to its full potential in most countries and this is particularly the case in developing economies. Only a very small fraction of the ESRD population in emerging countries ever gets transplanted because of the many constraints. This review focuses on KT in Nigeria between 2000 and 2010 and assessed particular challenges that need be addressed for KT potential to be fully harnessed in such resource-constrained settings. A total of 143 KTs were performed in 5 transplant centers, some of which have only recently opened. One-year graft and patient survival was 83.2% and 90.2%, respectively, while the 5-year graft and patient survival was 58.7% and 73.4%, respectively. Mortality was reported in 38 (27%) of recipients. The complications recorded included acute rejection episodes in 15–30%, chronic allograft nephropathy in 21(14.7%) and malignancies, particularly Kaposi Sarcoma, which was reported in 8 (5.6%) recipients. It was concluded that KT has led to an improved survival but is bedevilled with unaffordability, inaccessibility, a shortage of donor organs and poor legislative support. Enactment of relevant organ transplant legislation, subsidization of renal care, and further development of local capacities would improve KT utilization and thus lead to better outcomes.